The Dow Slumps Over 1,100 Points Despite Rate Cut as Treasury Yields Rise
The Dow Jones Industrial Average plummeted over 1,100 points on Wednesday, driven by a cut in federal interest rates but a sharp reduction in expected rate cuts for next year. Treasury yields surged, triggering a sea of red across the stock market.
The 25-basis-point interest rate cut by the Federal Reserve was overshadowed by the central bank’s reduction in its 2025 rate-cut forecast. The Fed now expects the benchmark rate to fall to 3.9% in 2025, which is a sharp decrease from its previous forecast of four rate cuts. This announcement sent Treasury yields higher, with the 2-year Treasury trading surging 11 basis points to 4.346%.
Several stocks were hit hard, including NVIDIA Corporation, which cut its intraday gains to end the day 1% lower. Tesla Inc also saw its impressive run come to an end, plummeting 8%. Jabil Circuit Inc, on the other hand, surged 7% after reporting stronger-than-expected fiscal first-quarter results and guidance. Birkenstock Holding Ltd also posted a gain of over 2% after reporting quarterly results that exceeded Wall Street estimates.
However, not all companies had a good day. General Mills Inc stumbled after cutting its annual outlook on earnings, citing increased promotional activity that had a negative impact on its margins.